Russia in 2019 The Art of Muddling Through

Russia in 2019: The Art of Muddling Through? Vladimir Gel’man (European University at St. Petersburg / University of Helsinki) Nordic Business Breakfast, 12 February 2019

Russia in 2019: The Art of Muddling Through? • Russian economic development in 2019 – sluggishness amid uncertain prospects; • Russian political development in 2019 – reactionary turn amid growing public dissatisfaction; • No grounds to expect major political and economic crises and collapse, similar to the 1990 s, yet no grounds to expect major advancements, too

Russia in 2019: The Art of Muddling Through? • Russia until 2014 – agenda of growth and socio-economic development as priority of the government (”modernization”); • 2014 – geopolitical turn, annexation of Crimea, major international tensions with the West over Ukraine, foreign sanctions; • Overall trend of decade after 2008 crisis – slow economic growth (12% per year), not enough for ”catch-up”, increasing isolationism (import substitution, counter-sanctions, etc. ) and authoritarianism

Russia in 2019: The Art of Muddling Through? • • • Good news: Solid currency reserves ($477700 million, Feb. 2019); Relatively low inflation (4. 3% official data for 2018); Bad news: Still sluggish economic growth (2. 3% official data for 2018 – hard to believe!), no rise of real incomes of Russians; • The rise of tax burden (VAT increased from 18% to 20%), increase of retirement age for Russians, ongoing over-regulation and creeping nationalization of assets; • Bad governance (corruption, lack of the rule of law) – no progress at all

Russia in 2019: The Art of Muddling Through? • Domestic political landscape – challenges to Kremlin’s monopoly: • Decline of public support of political status-quo (dissatisfaction): Levada-Center survey - 45% of respondents in Jan. 2019 agreed that Russia is moving to a wrong direction (compare with 23% in Oct. 2014) • Gradual decline of Putin’s approval rate (64/33% in Jan. 2019 – compare with 88/11% in Oct. 2014); • September 2018 regional elections: Kremlin-appointed governors lost in three out of twelve provinces (Vladimir oblast, Khakassia, Primorskii krai) • The rise of public protests (mostly environmental, economic, social and other issues – localized by the government to some extent)

Russia in 2019: The Art of Muddling Through? • Challenges lies ahead: • Next wave of regional elections set up for September 2019, including St. Petersburg gubernatorial elections; • Coming 2021 State Duma elections and expiring of Putin’s fourth term by 2024 – various solutions? • Responses by the Kremlin: • Propaganda does not work anymore (“the battle of TV against the fridge”); • Increasing use of “politics of fear”, more reliance upon coercion and repressions

Russia in 2019: The Art of Muddling Through? • What are the possible drivers of changes to economic and political status quo? • Exogenous shocks (falling oil prices, international conflicts, leadership changes, etc. )? • If no shocks like that, then the Kremlin may adjust to challenges in a manner of ”muddling through”, solving ongoing problems ”here and now”, but increasing their scope and magnitude for the future…

Russia in 2019: The Art of Muddling Through? • Thanks for your interest! • (vladimir. gelman@helsinki. fi)